N.J. Commissioner: State Regulation Helped Insurance Withstand Sagging Economy

New Jersey Banking and Insurance Commissioner Steven Goldman thinks the shaky economy's impact on insurers has been softened in part by state regulation. Sworn in to office by Gov. Jon Corzine in March 2006, Goldman is the chairman of the National Association of Insurance Commissioners' International Insurance Relations Committee and Reinsurance Task Force. Here is some of what Goldman had to say to BestWeek:

State Regulation

If you look at the financial sector over the entire spectrum, the one that has withstood the current economic crisis the best is the insurance sector. That's not by accident. The regulatory structure for the insurance sector has been more effective than the regulatory structure of the other sectors.

Federal Role

The most important part of a federal approach would be in the context of the discussion taking place about a systemic risk regulator. It is difficult for states, either singularly or in the aggregate, to develop programs which would enable the use of systemic risk regulation, which by definition, needs to be across all sectors of the financial services industry. A systemic risk regulator should include representatives from all segments -- including state regulators who regulate the insurance industry.

New Jersey Coastal Insurance

There is affordability and there is availability. We've had a number of new entrants come to the market; we have had surplus lines carriers in the market. It has become somewhat more expensive but we don't think it's become unaffordable and it's definitely available.

Insurers' Adjusting to Auto Reform

Happily, with respect to [the sunset of take-all-comers and caps on urban territories], unhappily with respect to the TREE [Territorial Rating Equilization Exchange] program we put in place. There are a number of carriers who I think understand the purpose. All carriers have been cooperative in working through the process. [The removal of old regulations] coupled with TREE enabled us to remove them without having disproportionate rates follow. We think it's been a highly competitive market.

TREE Progress

Quite good. It is industry board represented; continues to innovate for ways to make it work as smoothly as possible.

PIP Fee Schedule Stuck in Court

We've been trying hard to move that along. We're at the mercy of the court schedule, but we do want to see it implemented. To the extent rates are being driven somewhat higher, that is a principal cause. It would be a great help to New Jersey consumers and to the industry to get a comprehensive schedule in place.

Professional Liability Challenges

It has turned to a softer market the last year or so, so there has been less of an outcry as a result. We've proposed regulations, which would enable us to take a tighter look at the insurance treaties that some of the medical malpractice carriers have entered into so we can be certain there has been appropriate risk transfer. Principally what we are after there is to make sure that the audit committee reports directly to us when we come in about the nature on investments and return on investments. We are also going to propose some ability on the part of the department to review and approve rate increases and decreases.

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